Commodities markets summary

The price of oil rose as the US government reported shrinking crude supplies, and some good news overseas offset concerns about political wrangling in Washington.

The Energy Department's Energy Information Administration said crude oil supplies in the US fell last week by a million barrels, about half of what analysts expected.

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Oil prices also got a boost from a key survey measuring German business optimism. It showed slight improvement and was good news for Europe's largest economy.

Benchmark crude jumped $US1.58, or about 1.8 per cent, to finish at $US89.51 per barrel in New York. That's the biggest one-day price rise in a month.

Meanwhile many Americans are feeling less pain at the pump as gas prices hit another year-low at a national average just under $US3.23 a gallon, only a half-cent higher than a year ago.

BASE METALS

Base metals closed mostly lower on the London Metal Exchange, weighed by a mixture of profit taking and technical selling following a weaker-than-expected report on the US housing market.

At the close of open outcry trading, LME three-month copper was down 1.2 per cent at $US7,925 a metric ton. The metal earlier fell as low as $7,900/ton, its lowest price since November 11.

Base metal prices took a step lower in afternoon LME trade following a disappointing report on the US housing sector.

US housing starts fell 3.0 per cent in November from October, with construction of single family homes, which made up two-thirds of housing starts last month, falling by 4.1 per cent.

While the data prompted some initial profit taking, it was the metal's break below support at $US7,970/ton that saw losses accelerate, as stop-loss orders - commands to sell at a certain level - were triggered, said a London-based broker.

With the end of the year fast approaching, base metals may struggle for upward traction in the days ahead, said analysts.

PRECIOUS METALS

Gold futures eased to settle near a three month low, as investors looked for progress in US budget talks and took stock of gold's recent drop.

The most actively traded contract, for February delivery, fell $US3, or 0.2 per cent, to settle at $US1,667.70 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement since August 29.